STATE OF THE CAPITAL

There was so much said at our Breakfast & Schmooze Friday that we need two days to cover it. Prudential Real Estate Investors COODale Taysom says the firm's getting more aggressive in the CRE markets, especially as the US economic recovery takes hold andforeign capital returns. Dale says PRU was playing ?defense? in 2009 and 2010 when it came to CRE lending but now will be more aggressive: "All the open-ended core funds have cues to get in.?

And capital markets certainly have returned. Having placed $1.1Blast year, panelist Rod Reppe Jr, regional director for equities giant Goldman Sachs Commercial Mortgage Capital, says Goldman has already closed $2B this year, primarily with retail properties. ?It's literally a have and have not? lending environment. If the retail center has great sales, then it can get the loan. If not, the owner will have trouble. Despite the lending, underwriting remains conservative. ?I don't think you're going to see us go wild and crazyon the underwriting,? Rod cautions.

While the focus on investments have been in the gatewaymarketsof DC and NY—where we've seen steep cap rate compression— Grandbridge Real Estate Capital's SVP Matthew Rocco says investors are now chasing yield in smaller markets like Charlotte, Raleigh, and even Atlanta ?where there's a demonstrated modest employment gain.? He also likes Pittsburgh and Philadelphia as markets that have shown some resilience. As for the big question mark—the future of interest rates—all the participants expect them to go up, including Matthew who sees rates between 4.5% and 5%through 2012. ?Beyond a three-year projection, it gets really foggy,? he says. He also says interest rates should correlate to cap rates.

CBRE's Bill Leffler agrees that capital has returned to the market: ?Conduits are starting to take people out to lunch or dinner, so you know things are getting better.? Lenders like ?bread and butter? deals, such as grocery-anchored centers or apartments, he says.

We also bumped into tvsdesign's Rod Svedberg working the room. tvsdesign was a major event sponsor, and the company most recently earned an Award of Merit for its guestroom renovations at the Hyatt Regency Atlanta with the International Interior Design Association.